People over 65 years old who have 40 work credits qualify for premium-free Medicare. Individuals with fewer work credits can pay a monthly premium for Medicare coverage.

In many instances, people may wish to sign up for Part A when they become eligible for Medicare, even if they do not qualify for premium-free Part A. If they delay signing up, they may have to pay a late enrollment penalty.

This article describes Medicare work credits and provides an overview of Medicare. It also discusses what people can do if they do not have enough work credits, examines costs, and explains when a person may wish to delay enrolling in parts A and B.

Glossary of Medicare terms

We may use a few terms in this piece that can be helpful to understand when selecting the best insurance plan:

  • Deductible: This is an annual amount that a person must spend out of pocket within a certain time period before an insurer starts to fund their treatments.
  • Coinsurance: This is a percentage of a treatment cost that a person will need to self-fund. For Medicare Part B, this comes to 20%.
  • Copayment: This is a fixed dollar amount that an insured person pays when receiving certain treatments. For Medicare, this usually applies to prescription drugs.
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Before someone can qualify for premium-free Medicare or Social Security benefits, they must have 40 work credits.

People earn credits, or qualifying quarters, as they work and pay Social Security taxes on their income. For each quarter a person works, they earn 1 credit. As a result, a person can earn up to 4 credits per year.

To qualify for premium-free Medicare Part A, an individual must have worked 40 quarters in their lifetime. This means it takes around 10 years to earn the required 40 credits.

Earnings necessary to receive 1 credit may vary from year to year. In 2024, for example, a person must earn $1,730 to get 1 credit and $6,920 to get 4 credits for the year.

Learn more about 40 quarters of work.

Medicare parts

The Medicare parts include:

Coverage
Part A• inpatient hospital care
• hospice
• skilled nursing facilities
• home care
Part B• outpatient care
• doctor services
• durable medical equipment
• home healthcare
Part C (Advantage)• bundled coverage of parts A, B, and usually D
• must use in-network doctors
• possible extra coverage for vision, hearing, and dental
Part Dhelps cover out-of-pocket costs of Original Medicare (parts A and B)
Supplemental Insurance (Medigap)helps cover out-of-pocket costs of Original Medicare (parts A and B)

People with 40 work credits can expect the following costs in 2024:

Part A

Part A costs in 2024 include:

  • a $0 monthly premium
  • a $1,632 deductible for each benefit period
  • a $0 per day coinsurance for days 1 through 60 of each benefit period during a hospital stay
  • a $408 per day coinsurance for days 61 through 90 of each benefit period

Part B

Part B costs in 2024 include:

  • a $174.70 monthly premium for incomes up to $103,000
  • a $240 annual deductible
  • a 20% coinsurance

Part C

Part C costs in 2024 include the Part B monthly premium of $174.70, plus deductibles, copays, coinsurance, and the monthly Medicare Advantage plan premiums. If an individual earns more than $103,000 per year, they will have to pay an extra fee on top of the monthly premium.

Part D

Part D plan costs for 2021 include deductibles, copays, coinsurance, and monthly premiums. The average monthly premium for Medicare Part D is $34.70.

Medigap

The cost of Medigap varies by the type of plan, location, and other factors. The premiums also change each year. Individuals can use the find a plan tool to compare Medigap costs in their area.

Once a person turns 65 years old, they can enroll in Medicare even if they do not have the required 40 work credits to receive Social Security benefits. However, there may be additional costs, including Part A premiums.

If someone does not have 40 work credits, the only difference in their Medicare costs involves the Part A premium. All other costs will be identical to those of people who do have 40 work credits.

Individual credits

People with 40 work credits are eligible for premium-free Part A. In 2024, people with fewer than 30 work credits must pay the monthly premium of $505 to receive Part A benefits.

A person with 30 to 39 work credits must pay a monthly Part A premium of $278.

Spousal credits

If a married person does not have the required 40 work credits but their spouse does, the individual can qualify for premium-free Part A as long as they are over 65 years old. This is also the case if their spouse is deceased.

Learn more about Medicare spouse coverage.

A person can choose to enroll in Medicare Part A and Part B during their initial enrollment period, which is when they first reach 65 years old. In many cases, if they do not enroll when they are first eligible, they may have to pay a late enrollment penalty in the form of higher monthly premiums.

However, people who work past age 65 years and have health insurance with their employer may consider whether they should delay enrolling in Medicare parts A and B. The answer may depend on the size of the company that employs them.

Learn more about Medicare enrollment periods.

Companies with fewer than 20 employees

If a person’s employer has fewer than 20 employees, the Medicare rules about enrollment differ because it is up to the employer to decide whether the employee should enroll in Original Medicare (parts A and B) when they are first eligible at age 65 years.

If a person does enroll in Original Medicare, the employer’s health plan becomes the secondary payer because Medicare will settle any medical bills first. The person’s group health insurance pays for any outstanding services only, according to how Medicare works with other types of coverage.

Companies with more than 20 employees

A person who is age 65 years or older and working for a company with more than 20 employees may choose whether they want to enroll in Original Medicare (parts A and B) when they are first eligible.

There is no Medicare penalty for delaying enrollment, as long as the person is enrolled in their employer’s group health insurance. When the employer-supplied health coverage ends, Medicare offers a special enrollment period.

What about health savings accounts?

If a person is enrolled in their employer’s health insurance plan and has a health savings account (HSA), it may influence their decision about when to enroll in Original Medicare.

Group health plan with an HSA

Some people who work past age 65 years have both group health coverage and an HSA. After they enroll in Medicare, they may no longer contribute to their HSA, so they may choose to delay enrolling in Original Medicare until they stop working or until the employer’s health plan is no longer available.

To avoid penalties, the person must then enroll within 8 months of their coverage ending.

Individuals and their employers should also stop making contributions to their HSA 6 months before they retire. This is because once they have Medicare, they will no longer be able to make contributions. Medicare Part A coverage will start up 6 months before the date they signed up.

Group health plan with no HSA

If a person who is working past age 65 years is enrolled in their employer’s health plan but does not have an HSA, they may enroll in premium-free Medicare Part A if they have 40 work credits.

However, they can also choose to delay enrolling in Original Medicare until they or their spouse lose the group health coverage or stop working. To avoid penalties, they must enroll within 8 months of their coverage ending.

Learn more about HSAs and Medicare.

Medicare resources

For more resources to help guide you through the complex world of medical insurance, visit our Medicare hub.

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People ages 65 years and older are eligible to receive premium-free Medicare Part A if they or their spouse have 40 work credits. This equates to around 10 years of work in which they paid Social Security taxes.

If a person or their spouse does not have enough work credits, they may still get Medicare Part A coverage but will have to pay the monthly premiums.

Either with premium-free or monthly premiums, people will have to pay deductibles each year with their Medicare plan.